The Financial Institutional Bankruptcy Act of 2014 Passed
The House of Representatives have passed a bill that will permit banks to file for bankruptcy.
The bill, passed on Monday, is known as The Financial Institutional Bankruptcy Act of 2014. It will allow financial institutions to willingly begin the process of bankruptcy, or in some instances, allow the Federal Reserve to start the process.
This bill was a rewrite to current bankruptcy law and was supported by Wall Street banks. The law will not only apply to financial organizations but also to other large commercial firms, such as insurance companies.
“This process will allow a failing financial institution to transfer its assets to a newly formed bridge company over a single weekend, which will promote confidence in the financial marketplace,” Ranking Member John Conyers (D-Mi) said in a floor speech, urging colleagues to pass the bill.
The bill employs a “single point of entry” method, which will permit a holding company to enter bankruptcy and allow subsidiaries to remain outside the process.
This law builds upon previous efforts to avoid taxpayer bailouts of financial institutions. Under the Dodd-Frank financial reform law, known as the Orderly Liquidation Authority, there is a stipulation to allow an administratively-led resolution procedure.
In his speech, Conyers argues that bankruptcy is a better option; he also stated he supported the bill because it did not reduce any particular conditions of the law.
Critics feel the bill favors large banks at the expense of their trading associates and has no direct promise to prevent future taxpayer bailouts.
The Financial Institutional Bankruptcy Act of 2014 was passed with bipartisan support. It was co-sponsored by Rep. Spencer Bachus (R-Al.), House Judiciary Committee Chairman Bob Goodlatte (R-Va), John Conyers. It is part of an ongoing response to the fallout of the 2008 collapse of Lehman Brothers.
Staff Writer (2014 December 1) The Financial Institutional Bankruptcy Act of 2014 Passed. Retrieved on December 3, 2014 From TotalBankruptcy.com